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Rail News Home Norfolk Southern Railway

May 2021

Rail News: Norfolk Southern Railway

Guest Comment: James Squires on Why NS is ‘In the Business of a Better Planet’


The environmental advantage of steel wheels over their 18-wheel counterparts is well-known. Our fuel-efficient locomotives haul a ton of freight more than 440 miles on a single gallon of fuel. That’s one of the reasons our customers can reduce their carbon emissions by up to 75 percent when they choose rail over truck.

Managing modes of transportation is one of the most powerful tools shippers can use to reduce their carbon footprint. Our customers are increasingly looking to us for help with making their supply chain greener. More than 25% of our customers have established public goals for carbon reduction through the CDP’s global disclosure system.

With increasing demand for sustainable transportation solutions from our customers, and the prospect of autonomous, all-electric or even hydrogen-powered trucks on the horizon, the rail industry can’t rest on our natural efficiency advantage. We need to do more.

Precision scheduled railroading is certainly one answer. Longer, heavier trains and a fluid network improve efficiency and allow us to retire older, less efficient locomotives from the fleet, as we did in the first quarter of 2020. Operational efficiency and sustainability are tightly linked, which is one of the reasons we say Norfolk Southern is in the business of a better planet.

For us, the answer also involves additional targeted investment in sustainable operations. In a rail industry first, we recently issued $500 million in 10-year green bonds to fund investments that move our business forward and improve our environmental footprint.

Green bonds aren’t new. According to the Climate Bonds Initiative, $270 billion in green bonds were issued worldwide in 2020. These bonds typically sell at a lower coupon rate than traditional bonds — a premium that has been dubbed a “greenium” in the industry. The response from the financial community to our offer was substantial. We had buyer interest that significantly exceeded the size of our offering.

We first began to discuss the idea of green bonds nearly a year ago. An interesting aspect of the process is that we worked with an independent party to ensure projects identified for funding align with green principles. This is an important validation for investors, knowing their funds are going to projects with a positive environmental impact.

The exercise turned into a thorough evaluation of railroad industry capital expenditures — which investments would qualify, and which would not. If other railroads follow our lead into green bonds, as we hope they will, we have essentially “mapped” the industry, making the process substantially easier for those who follow.

Proceeds from the bonds can be allocated towards projects that improve locomotive fuel efficiency, such as converting more locomotives to AC power and maximizing energy management technologies. Other uses may include investments in new and expanded intermodal terminals, supporting the modal shift of freight from truck to rail. Renewable energy projects, green buildings, energy efficiency initiatives and further investments in reforestation projects also are possible.

Our recent financing was noteworthy not only because of our industry-first green bonds, but also because we concurrently issued $600 million in 100-year bonds. Only a handful of companies have the staying power to earn that kind of investor confidence, and that’s also part of our sustainability story. More than most industries, we take a long-term view.

That’s another reason it’s important we integrate sustainability into our daily operations, help our customers reduce their supply-chain emissions, and keep our commitments to be a responsible corporate citizen. The projects funded by our green bonds are an important way we will keep these commitments.

James Squires is the chairman, president and chief executive officer of Norfolk Southern Corp.

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